Encana Corp. has turned to an outsider to lead it for the first time, hiring a former BP PLC executive and giving him up to two years to turn around the struggling business.
Doug Suttles, who retired from BP’s exploration and production unit in early 2011 after serving as its public face during its massive oil spill in the Gulf of Mexico, has been given the task of improving returns and restoring the company’s faded reputation as a Canadian-based champion of the natural gas industry.
Encana, like many of its competitors, has been on a losing streak, posting four successive quarterly losses and selling assets in order to strengthen its balance sheet. Natural gas prices have rallied, but investors remain gun-shy after the company has made a number of strategic shifts – straying from its central business and pinning its hopes on natural gas liquids and oil, which make up only a small proportion of production. The shares remain mired near their lowest point since the company spun off its oil sands assets into a separate company in 2009.
Mr. Suttles must present a focused plan to lure back investors, convincing them that his strategy will allow Encana to ride out problems facing the entire gas industry, such as volatile commodity prices and higher costs to drill unconventional wells.
Clayton Woitas, Encana’s outgoing interim CEO and incoming chairman, said he expects to see results in 12 to 24 months.
Mr. Suttles, an engineer, asked investors for patience, noting that he wants to deepen his understanding of its assets and people before unveiling a new plan.
“I want to do this once and I want to do it right,” Mr. Suttles said. “I hope that you can appreciate that it will take some time before I’ll be in a position to articulate a clear and concise vision.”
His appointment failed to lift Encana stock, which closed down 2 per cent at $18.54 on the Toronto Stock Exchange.
Mr. Suttles gained notoriety in the summer of 2010 as BP tried to plug the Macondo oil well, which spewed millions of barrels of crude into the Gulf of Mexico following a blast that killed 11 workers and exposed a host of safety violations.
At the time, he defended BP’s initially low estimate of crude gushing into the Gulf from the mile-deep well, said Tom Bergin, author of Spills and Spin: The Inside Story of BP, which chronicles the months-long battle to contain the crude, as well as the corporate culture that existed before and during the crisis. BP put the flow rate at 5,000 barrels a day a month after the disaster, even as some U.S. government estimates were as much as five times that.
“It think that raises questions about his judgment at the time, particularly because the issue is the flow rate would decide the fine, so it did appear to a lot of people to be very self-serving,” said Mr. Bergin, who is European corporate strategy correspondent for Reuters.
Mr. Suttles, however, demonstrated he was open to unconventional ideas. He allowed Hollywood actor Kevin Costner to get involved, acquiring a number of centrifuge units that separate oil from water in large volumes from Mr. Costner’s company.
Mr. Woitas took over when the Calgary-based company and Randy Eresman, its previous leader, parted ways in January. Mr. Suttles argued that his qualifications stem from his global experience, rather than being an expert in unconventional natural gas fields.
“I have been involved with some resources plays, but I also know that’s ... one of the real strengths this team has,” he said.
Encana is not alone in its desire to rewrite its playbook in an attempt to juice profits and energize investors. Penn West Petroleum Ltd. replaced its chief executive officer without warning last week, and Talisman Energy Inc. did the same in September.